Direct-From-Source Data Tightens Security and Compliance for Online Gambling ID Verification

What comes to mind when you think of online gambling? Perhaps a well-intentioned internet-based poker game, an online lottery, or even fantasy sports leagues. But what about ID verification? Probably not.

Players Get a Surprise as ID Verification for Online Gambling Gets Serious

When online gambling first became legal in the U.S. in New Jersey and Nevada in 2011, players excitedly signed up for accounts. Since then, online gambling has become increasingly popular, especially with the rise of fantasy sports leagues organized by sites like FanDuel and DraftKings. But recently, some players have been caught by surprise by stricter ID verification practices.

In the early days of online gambling, most sites only got serious about ID verification when users wanted to withdraw money they won. However, regulations have changed that, and now players are required to undergo an extensive process to verify that their identities meet requirements around age and location. This ID verification process typically includes uploading a government ID or passport, a recent utility bill and bank statement, and sharing Social Security Number.

Online gambling sites are now subject to regulations stipulated under the Bank Secrecy Act, including:

• AML, or anti-money laundering laws with which all financial institutions must comply. These laws require institutions to file a report for any individual who makes a cash transaction of over $10,000.  In the case of online gambling, AML laws are particularly focused on investigating cross-border funds transfers and looking for users who create multiple accounts with the same site. That’s because winning and then withdrawing funds from an online gambling account can be an easy way for money launderers to mask the original source of funds.

• KYC, or Know Your Customer program, which is required by the Bank Secrecy Act and U.S. Patriot Act to confirm that customers only open accounts in their own legal name. For online gambling, KYC pays particularly close attention to age (as players must be over 21), location (as players in the U.S. must be located within the state borders of New Jersey or Nevada, the only two states where online gambling is legal), and criminal background (as players in New Jersey can not have been convicted of a criminal offense punishable by more than six months).
• Customer Identification Program (CIP), which is part of KYC and is meant to curb identity fraud. Under CIP, financial institutions must verify the identity of customers including their name, date of birth, address, and taxpayer ID number (for US citizens) or passport or alien ID number (for non-US citizens).

Far From Perfect: Troubles Plague ID Verification for Online Gambling

Despite the fact that online gambling sites have gotten more serious about ID verification in recent years, troubles still plague this part of the process. Gambling sites face criticism from all sides, as players have bemoaned having to jump through hoops even as regulators question the level of scrutiny in place. 

For example, FanDuel and DraftKings players have reported that both sites have asked them to send images of their driver’s licenses and credit cards over email and other unencrypted forms of communication. In cases like these, while ID verification might meet regulations like AML, KYC, and CIP, the practice puts users at risk by creating an easy opportunity for hackers to get sensitive identity information due to poor cybersecurity.

And then there are cases like the Irish site Paddy Power, which was fined nearly £310,000 in 2016 for failing to comply with KYC regulations. Paddy Power was fined for failing to determine the source of funds for two players and not properly responding to alerts about potential money laundering activities from another player.

Revamping the ID Verification Process for Online Gambling

Whether it’s keeping players’ information safe or properly adhering to regulations, it’s clear that there’s room for improvement when it comes to ID verification for online gambling. Fortunately, there’s a better way, and it all starts with using direct-from-source data.

Direct-from-source data provides online gambling sites with ID verification from a third party source, such as a utility provider, through a one-time data feed. Players simply need to log in to their third party account and online gambling sites can pull the necessary ID verification points directly from that account. This process eases security concerns because:

1. Players don’t have to upload data themselves, which eliminates worries about sending information over unencrypted networks as well as the possibility that users can falsify information when uploading their own details
2. The sites don’t actually store any data, which eases fears about them housing sensitive, personally identifiable information on vulnerable networks

Best of all, this type of direct-from-source data feed works with financial institutions and utility providers, both of which are reliable sources of information for online gambling sites.

Want to learn more about how utility data can help your business? Contact one of our utility data experts.

Related Resources:

• Solutions Sheet: Utility Data for Identity Verification
• GDPR’s Resounding Impacts on Identity Verification
• Who’s Who? Identity Verification in a Digital World

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